It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell InvestSMART Group Limited (ASX:INV), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
InvestSMART Group Insider Transactions Over The Last Year
While no particular insider transaction stood out, we can still look at the overall trading.
InvestSMART Group insiders may have bought shares in the last year, but they didn't sell any. They paid about AU$0.085 on average. I'd consider this a positive as it suggests insiders see value at around the current price, which is AU$0.059. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at InvestSMART Group Have Bought Stock Recently
There was some insider buying at InvestSMART Group over the last quarter. MD, CEO & Executive Director Peter Hodge purchased AU$35k worth of shares in that period. It's great to see that insiders are only buying, not selling. However, in this case the amount invested recently is quite small.
Does InvestSMART Group Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that InvestSMART Group insiders own 32% of the company, worth about AU$2.4m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About InvestSMART Group Insiders?
We note a that there has been a bit of insider buying recently (but no selling). That said, the purchases were not large. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in InvestSMART Group and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing InvestSMART Group. Every company has risks, and we've spotted 3 warning signs for InvestSMART Group (of which 2 can't be ignored!) you should know about.
Of course InvestSMART Group may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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